Twelve-year-old Johnny Holiday and his friend, Eddie Duggan, have been stealing for Eddie's father who operates a saloon as a front for a fencing operation. On his way home from the saloon, Johnny is followed by two police officers. When Mrs. Bellini, who is looking after Johnny while is mother is in hospital, answers the door, the police frisk Johnny and find evidence bearing the name of a drugstore they robbed. Johnny is arrested and sent to the Indiana Boys' School, a reform school located in Plainfield. As soon as he arrives there, Johnny tries to escape into the nearby woods, but runs right into the arms of Sarge Walker, a former cavalry sergeant who is in charge of the school's farm. Later, Dr. Piper, the school's psychologist, offers Johnny a range of work duties, but Johnny does not cooperate. Piper then assigns Johnny to work in Walker's stable and, although he is afraid of horses, grooms a mare named Nellie and bonds with her. Before long, Walker lets Johnny drive the milk wagon, but when tree-trimmers frighten Nellie, the wagon tips over, spilling several milk cans. After the accident, school superintendent Lang hears Walker complaining about Johnny and transfers him to the shoe repair shop. Later, however, Walker talks to Lang about having Johnny transferred back to the farm, but he refuses permission. Later, during a ceremony at the school, the governor of Indiana congratulates the boys on their work. Johnny is proudly marching in a dress parade when he sees Duggan being brought into the school. Walker, a gruff sentimentalist, has taken a liking to Johnny, and Johnny finds himself torn between devotion to Walker and the horses and loyalty to Duggan. After Walker asks Lang's permission to take Johnny along on a trip to a stock show in Indianapolis, Duggan hears about it and is not pleased. However, Duggan gives Johnny money and asks him to buy cigarettes for him. When they drive past the hospital where Johnny's mother is, Walker pulls over and lets him go inside to see her, even giving him some money to buy her candy. Johnny's mother tells Walker that she feels that Johnny turned bad after meeting Duggan and is grateful that Walker is trying to help him. Walker notices the cigarettes tucked inside Johnny's shirt and confiscates them, and when they get back to the farm, Duggan chastises Johnny for losing his money. Later, as Johnny and Walker are playing a game of mumblety peg, Duggan sees them from the top of the hay loft and drops hay tongs on Walker, but Johnny notices them just in time to push Walker out of the way. Piper diagnoses Duggan as a psychopath and makes arrangements to have him transferred from the farm. Back on his stable duties, Johnny is assigned to watch over Nellie, who is pregnant. When the horse falls ill, Walker thinks that the foal has turned and phones the veterinarian, who tells him that he must kill Nellie in order to save her foal. Walker takes his gun and orders Johnny to go back to his dorm. However, when Johnny hears the shot, he runs back, begins crying and cannot be consoled even by the sight of the healthy colt Walker saves. Duggan uses Walker's action to encourage Johnny to rebel against him, and when Johnny's mother comes to visit him, Walker explains to her that she cannot see him as he is confined to disciplinary barracks. Johnny eventually becomes involved in the care of the colt, but Duggan persuades him to escape with him. On Christmas Eve, in the school's chapel, singer/composer Hoagy Carmichael, a native of Indiana, performs with his friend, organist Buddy Cole. When Hoagy invites some of the boys up on stage to sing his new Christmas song, Johnny and Duggan decide to escape, but Walker sees them leaving. In the barn, Duggan makes Johnny try to hotwire a jeep and goes to get Walker's gun. When Walker arrives, Duggan demands the vehicle's keys and Walker sends Johnny into his office to get them. However, Johnny picks up the phone and calls for help while pleading with Duggan to spare Walker. When Duggan hears the alarms and sees the phone off the hook, he takes Johnny hostage. After being taunted by Walker, Duggan shoots him. Officials arrive and capture Duggan, while Johnny sobs over the wounded Walker. Walker recovers, however, and is proud of Johnny's actions. Later, his penance done, Johnny and his mother bid farewell to Walker and the colt.